BOND REPORT: 10-year Treasury Yield Trades Above 2.7%, Highest Since April 2014

The yield on the 10-year Treasury note rose above 2.7% on Monday, adding to a persistent climb in yields for U.S. government paper on expectations of increased interest rates, an upbeat economic outlook and anticipation of greater issuance of government bonds.

How are Treasurys performing?

The yield on the benchmark 10-year Treasury note rose 7 basis points to 2.717% Monday in New York, its highest since April 2014 (http://www.marketwatch.com/story/us-10-year-yield-jumps-above-27-to-highest-level-since-2014-2018-01-29), according to FactSet data. The 2-year note yield added 2.4 basis points to 2.144%, while the 30-year bond yield rose 4.75 basis points to 2.956%, nearing the psychologically significant level at 3% for the long bond.

Bond prices move inversely to yields.

What are driving markets?

The rise in yields, highlighting ongoing selling of U.S. bonds, comes after a Friday report on gross domestic product showed that the U.S. expanded at a 2.6% annual pace (http://www.marketwatch.com/story/us-economy-grows-26-in-fourth-quarter-gdp-shows-2018-01-26) in the fourth quarter, extending one of the best stretches of growth during the current eight-and-a-half-year-old upturn. Although, the preliminary reading fell slightly short of expectations for 3%, it signaled that the domestic economy remains solid.

Looking ahead, investors are awaiting the State of the Union address from President Donald Trump on Tuesday, the Federal Reserve's updated policy statement on Wednesday and January read of nonfarm payrolls on Friday.

Read: What time is Trump's State of the Union address? (http://www.marketwatch.com/story/what-time-is-trumps-state-of-the-union-address-2018-01-25)

Wall Street also was anticipating the Treasury Department's quarterly refunding announcement, with some strategists expecting that coming issuance could be twice what it was last year, a factor likely to weigh on demand for existing Treasurys.

Market participants also are keeping on eye on the debt-ceiling conflict, which recently caused a three-day, partial government shutdown. Lawmakers will next review the government's debt limit Feb. 8.

What are strategists saying?

Strategists at Brown Brothers Harriman in a research note said the refunding announcements are "important because investors have already been put on notice that the size of the coupon offerings will increase. Many participants still do not appear to appreciate that the government's net issuance this year will be around twice last year's $550 [billion]. Around a third or so will be T-bills, but this cannot happen until the debt ceiling is resolved," they said.

(END) Dow Jones Newswires

January 29, 2018 08:39 ET (13:39 GMT)